COP26 and the Future of Hard-to-Abate Sectors in Asia
12 November 2021 – by Viktor Tachev
For decades, hard-to-abate sectors like aviation, steel and shipping have relied on coal, oil and natural gas. In turn, these hard-to-abate sectors are some of the largest CO2 emitters globally, with complete decarbonisation remaining challenging. High costs, insufficient renewable energy supplies and vested interests in the status quo contribute to the conundrum.
Recently, COP26 gave rise to several initiatives geared around a fossil fuel phase-out and more affordable and reliable clean energy and energy efficiency. If pursued and acted upon, the policies could bring the globe a step closer to the decarbonisation of hard-to-abate industries. To achieve net-zero emissions, energy efficiency, energy transition, and reducing carbon emissions is also necessary.
COP26: The Fossil Fuel and Power Industry Highlights
Leaving Coal Behind
COP26 marked the launch of the “coal to clean” statement, with the initiative aiming for a rapid renewable energy scale-up and a shift away from coal by 2040. This would see the globe end the construction of new unabated coal power plants. Amongst others, three of the world’s top ten coal power markets – South Korea, Indonesia and Vietnam – have all signed up.
The Powering Past Coal Alliance (PPCA) also expanded by 27 members, reaching 164. As a result, almost two-thirds of governments in the OECD and the European Union are now committed to phasing out coal by 2030. Building on the momentum, 11 leading financial institutions joined the alliance with a combined USD 17 trillion in assets.
Oil and Natural Gas in the Spotlight
Attention was not lost on the oil and natural gas industry with the official launch of the Beyond Oil and Gas Alliance at COP26. Led by Costa Rica and Denmark, the alliance and its members committed to stamping out oil and gas. However, so far, no Asian country has joined.
An NGO-led report targeting the oil and gas industry that was recently published also used the climate summit to keep the oil and gas industry on its toes. The Global Oil & Gas Exit List is an extensive public database covering 966 companies that account for 95% of oil and gas production. The report highlights the biggest emitters and advocates to prevent expansion by speeding up financial institutions’ oil and gas exclusion policies.
Ending Fossil Fuels Funding
In financial circles, the financing for fossil fuels projects took another blow. The Asian Development Bank announced a USD 2 billion fund to support Indonesia and the Philippines to retire their coal plants early. Both countries expect to retire half of their coal power plants within 15 years. Canada also committed USD 1 billion for developing countries to accelerate away from coal.
Following this, 20 countries, including the U.K. and the U.S., pledged to halt public financing of overseas fossil fuel projects by 2022. Adding that, they would instead prioritise public finance for clean energy projects. This is the first commitment to end not only coal financing but also oil and gas.
COP26 and the Other Harder-to-Abate Sectors
The First Movers Coalition announced at COP26 targets to support the development of low-carbon technologies for hard-to-abate sectors. Leaders solidified their commitment to using zero-emissions fuels by 2030, with green hydrogen doing most of the heavy lifting. This would cover industrial sectors like transportation and steel. The latter saw a notable agreement by the globe’s largest steel producers committing to net-zero steel production by 2030. To spur encouragement, the U.S. and EU suspended tariffs on low carbon steel and aluminium. These are important steps to achieve net zero emissions and climate change.
The Effect of the COP26 Announcements on the Future of Hard-to-Abate Sectors in Asia and Net Zero Carbon Emissions
The announcements at COP26 are building on recent momentum towards decarbonising society, including those hard-to-abate sectors. The rollout of clean energy solutions, renewable electricity, financial measures, emissions reduction targets and improved transparency and accountability are all valuable measures.
In Asia, the decisions made at COP26 will ripple through the continent, as it is the global manufacturing hub. Collectively, the pledges will gradually limit the possibility of using fossil fuels to power hard-to-abate industries. But conversely, it will enable clean energy sources to become more affordable and accessible, vastly easing the transition.
The burden of decarbonisation won’t squarely fall on companies themselves. Countries are already realising the importance of collaboration to achieve the best results. For companies in hard-to-abate industries, excuses for not decarbonising are fast becoming a thing of the past. Going green, it seems, is the only option left.
by Viktor Tachev
Viktor has years of experience in financial markets and energy finance, working as a marketing consultant and content creator for leading institutions, NGOs, and tech startups. He is a regular contributor to knowledge hubs and magazines, tackling the latest trends in sustainability and green energy.Read more